ZIM Integrated Shipping’s (NYSE:ZIM) latest announcement is good news for owners of ZIM stock.
The Israeli container shipping company announced on April 24 that it is adding a weekly transatlantic shipping service for its ZIM Container Turkey service (ZCT) from Turkey.
Ships will depart from Mersin, stopping in three regional cities before heading to New York and then down the East Coast to Norfolk and Savannah before heading back across the Atlantic to Mersin.
The move strengthens the company’s Atlantic business, not to mention the revenues generated from emerging markets such as Turkey. ZIM stock is up more than 63% over the past year. If it wants to keep moving higher, it needs to grow its revenue from the U.S. East Coast. Here’s why.
ZIM’s Atlantic Business Isn’t What It Could Be
According to its annual report, ZIM generated 18% of its carried twenty-foot equivalent units (TEUs) from the Atlantic trade zone in 2021. That’s its third-largest trade zone behind Intra-Asia (27%) and Transpacific (39%). Cross Suez (10%) and Latin America (6%) follow behind the Atlantic.
It holds a 10% market share of the niche route from the U.S. East Coast and the Gulf of Mexico to the Mediterranean within the Atlantic trade zone. The weekly service from Turkey will only add to this share. It comes at an important time for the company. ZIM’s Atlantic business as a percentage overall slipped 300 basis points in 2021 from 21% a year earlier.
It currently offers 13 services within the Atlantic-Europe trade zone with an effective weekly capacity of 10.232 TEUs. As a percentage of freight revenue from containerized cargo, the Atlantic-Europe trade zone accounted for 10%.
Every Little Bit Helps ZIM Stock
While there is no question ZIM relies on its Transpacific business to drive its growth — in 2021, Transpacific revenue jumped 184% to $5.3 billion, while the TEUs in this trade zone rose 22.2% — its Atlantic-Europe business managed to grow revenue by 66% to $960.7 million on 4.4% growth in TEUs.
The addition of a weekly route from Turkey to the U.S. East Coast might not be a gamechanger, but every little bit helps.
Since its February 2021 initial public offering (IPO), ZIM has paid out $21.50 in dividends, including a $2 special dividend last September. The company intends to allocate 20% of net income per quarter to dividends. Adding the Turkey route should help increase its net income and dividends in 2022.
Down significantly from March highs, ZIM is a buy on the dip.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.